EXHIBIT
10.1

     

    LOAN AND SECURITY
AGREEMENT

     

    This LOAN
AND SECURITY AGREEMENT is dated as of December 15, 2009, by and between
Healthwarehouse.com, Inc., a Delaware corporation (“Parent”),
HWAREH.com, Inc., a Delaware corporation (“Subsidiary”
and, with Parent, each a “Borrower”)
and HWH Lending LLC, a Delaware limited liability company, as lender (“Lender”).

     

    RECITALS

     

    WHEREAS, Borrowers desire that
Lender extend a loan to Borrowers, the proceeds of which will be used by
Borrowers for working capital purposes; and

     

    WHEREAS, Borrowers desire to
secure their Obligations under the Loan Documents by granting to Lender a Lien
upon all of the Collateral of Borrowers.

     

    NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, Borrowers and Lender agree as follows:

     

    SECTION
1

     

    DEFINITIONS

     

    1.1           Certain Defined
Terms.  The following terms used in this Agreement shall have
the following meanings:

     

    “Accounts”
means all of each Borrowers’ now existing and future accounts (as defined in the
UCC).

     

    “Additional
Advance” has the meaning assigned to such term in Section 2.1.

     

    “Advance”
has the meaning assigned to such term in Section
2.1.

     

    “Affiliate”
means any Person (other than Lender): (a) directly or indirectly controlling,
controlled by, or under common control with any Borrower; (b) directly or
indirectly owning, controlling or holding five percent (5%) or more of any
equity interest in any Borrower; (c) five percent (5%) or more of whose
voting stock or other equity interest having ordinary voting power for the
election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by any Borrower; or (d)
which has a senior executive officer who is also a senior executive officer of
any Borrower.  For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling”,
“controlled
by” and “under common
control with”) means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or other equity interest, or
by contract or otherwise.

     

    “Agreement”
means this Loan and Security Agreement as amended, restated, supplemented or
otherwise modified from time to time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Asset
Disposition” means the disposition, in any transaction or series of
related transactions, whether by sale, lease (including any disposition in
connection with a sale-lease back or synthetic lease transaction), transfer,
loss, damage, destruction, condemnation or otherwise, of all, or substantially
all, of the assets of any Borrower (whether such assets are now owned or
hereafter acquired) or which has the effect of selling or otherwise disposing of
the whole or a major part of the business or operations of any Borrower, in each
case, whether or not consideration therefore consists of cash, securities or
other assets owned by the acquiring Person, except where such disposition is
made to an Affiliate of such Borrower.

     

    “Borrower”
has the meaning assigned to that term in the preamble to this
Agreement.

     

    “Business
Day” means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York, or is a day on which
banking institutions located in such state are permitted to be
closed.

     

    “Capitalized
Lease” means: (a) any lease of property, real or personal, if the then
present value of the minimum rental commitment thereunder should, in accordance
with GAAP, be capitalized on a balance sheet of Borrower, and (b) any other such
lease, the obligations under which are capitalized on the balance sheet of any
Borrower.

     

    “Capital
Stock” means any and all capital stock, membership, partnership or other
equity interests of each Borrower.

     

    “Change of
Control” means  at any time, (i) the current shareholders of
any Borrower shall cease to beneficially own and control, directly or indirectly
on a fully diluted basis, fifity-one percent (51%) of the issued and outstanding
Common Stock of such Borrower or (ii) any Person or group other than the current
shareholders of any Borrower shall have the right to elect a majority of the
seats on such Borrowers’ board of directors, but excluding any changes resulting
from bona fide venture capital financing and public offerings of Capital
Stock.

     

    “Closing
Date” means December 15, 2009.

     

    “Collateral”
means, collectively, any and all assets of any Borrower on which a Lien in favor
of Lender has been created and/or granted to secure the Obligations under the
Loan Documents.

     

    “Commission”
means the Securities and Exchange Commission.

     

    “Confidential
Information” has the meaning assigned to that term in Section 8.14.

     

    “Default”
means a condition, act or event that, after notice or lapse of time or both,
would constitute an Event of Default.

     

    “Documents of
Title” means all present and future documents (as defined in the UCC),
and any and all warehouse receipts, bills of lading, shipping documents, chattel
paper, instruments and similar documents, all whether negotiable or not and all
goods and Inventory relating thereto and all cash and non-cash proceeds of the
foregoing.

     

    “Employee Benefit
Plan” means any employee benefit plan within the meaning of Section 3(3)
of ERISA which (a) is maintained for employees of any Borrower or any ERISA
Affiliate or (b) has at any time within the preceding six (6) years been
maintained for the employees of any Borrower and/or any current or former ERISA
Affiliate.

     

    
      
        
        

      

      
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    “EPA” shall
mean the United States Environmental Protection Agency and any governmental body
or agency succeeding to the functions thereof.

     

    “Equipment” means all equipment,
whether now owned or hereafter acquired (as defined in the UCC), including,
without limitation (whether or not included in the UCC definition of
“equipment”), all furniture, furnishings, fixtures, machinery, motor vehicles,
trucks, trailers, vessels, aircraft and rolling stock and all parts thereof and
all additions, accessories, motors, engines, and accessions thereto and
replacements therefor and all cash and non-cash proceeds (as defined in the UCC)
of any and all of the foregoing.

     

    “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any successor statute and all rules and regulations promulgated
thereunder.

     

    “ERISA
Affiliate” as applied to any Borrower and its Subsidiaries, means any
Person who is a member of a group which is under common control with such
Borrower and its Subsidiaries, who together with such Borrower and its
Subsidiaries is treated as a single employer within the meaning of Section
414(b) and (c) of the IRC.

     

    “Event of
Default” means any of the events set forth in Section
7.1.

     

    “GAAP”
means generally accepted accounting principles in effect from time to time in
the United States, applied on a consistent basis.

     

    “General
Intangibles” means all of each Borrowers’ “general intangibles” as
defined in the UCC, now owned or hereafter acquired, including, without
limitation (whether or not included in the UCC definition of “general
intangibles”), all of such Borrowers’ then owned or existing and future acquired
or arising general intangibles, choses in action and causes of action and all
other intangible personal property of such Borrower of every kind and nature,
including, without limitation, Intellectual Property, corporate or other
business records, inventions, designs, plans, specifications, trade secrets,
goodwill, computer software, customer lists, licenses, franchises, tax refund
claims, reversions or any rights thereto and any other amounts payable to such
Borrower from any employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, and business interruption, property,
casualty or any similar type of insurance and any proceeds thereof, and all cash
and non-cash proceeds (as defined in the UCC) of any and all of the
foregoing.

     

    “Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

     

    “Guarantee”
means that certain Guarantee Agreement, dated as of the date hereof, by and
between Lender and Lalit Dhadphale as Guarantor.

     

    
      
        
        

      

      
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    “Indebtedness”
means without duplication, with respect to each Borrower:  (a) all
obligations of Borrower for borrowed money, (b) all obligations of Borrower
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of Borrower upon which interest charges are customarily paid, (d)
all obligations of Borrower under conditional sale or other title retention
agreements relating to property acquired by Borrower, (e) all obligations of
Borrower in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of business
and excluding installments of premiums payable with respect to policies of
insurance contracted for in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by Borrower, whether or not the Indebtedness secured
thereby has been assumed, (g) all guaranties or endorsements by Borrower of
others, (h) all obligations under Capitalized Leases of Borrower attributable to
the payment of principal, (i) all obligations, contingent or otherwise, of
Borrower as an account party in respect of letters of credit and letters of
guaranty, and (j) all obligations, contingent or otherwise, of Borrower in
respect of bankers’ acceptances.

     

    “Intellectual
Property” means all present and future (a) designs, patents, patent
rights and applications therefor, licenses rights, fees, and royalties with
respect thereof; (b) trademarks, service marks, trade names and
registrations and applications therefore, licenses, fees and royalties with
respect thereof; (c) copyrights, renewals and all applications and registrations
therefor, licenses, fees and royalties with respect thereof, (d) software or
computer programs, trade secrets, methods, processes, know-how, drawings,
specifications, and descriptions, and (e) all memoranda, notes and records with
respect to any research and development, whether now owned or hereafter
acquired, (f) all goodwill associated with any of the foregoing described in
subsections (a) – (e), and proceeds of all of the foregoing, including, without
limitation, proceeds of insurance policies thereon.

     

    “Inventory”
means, with respect to each Borrower, all “inventory”
as defined in the UCC including, without limitation (whether or not included in
the UCC definition of “inventory”), all of Borrowers’ then owned or existing and
future acquired or arising:  (a) inventory, merchandise, goods and
other personal property intended for sale or lease or for display or
demonstration; (b) inventory and any portion thereof that may be returned,
rejected, reclaimed or repossessed by either Lender or Borrower; (c) work in
process; (d) raw materials and other materials and supplies, goods, incidentals,
packaging materials and labels of every nature and description used or which
might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of the foregoing or otherwise used
or consumed in the conduct of business; (e) documents evidencing, and
General Intangibles relating to, any of the foregoing; and (f) all cash and
non-cash proceeds (as defined in the UCC) of any and all of the
foregoing.

     

    “Investment
Property” means a security, whether certificated or uncertificated,
security entitlement, securities account, commodity contract or commodity
account.

     

    “IRC” means
the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute and all rules and regulations promulgated
thereunder.

     

    “Lender”
has the meaning assigned to that term in the preamble to this
Agreement.

     

    
      
        
        

      

      
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    “Liabilities”
shall have the meaning given that term in accordance with GAAP and shall include
all Indebtedness.

     

    “Lien”
means any lien (whether statutory or otherwise), mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, charge or encumbrance of
any kind, whether voluntary or involuntary (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).

     

    “Loan”
means the unpaid balance of the Loan made pursuant to Section
2.1.

     

    “Loan
Documents” means this Agreement, the Notes, the Warrants, the Guarantee,
the Lock-Up Agreement and all other instruments, documents, guaranties and
agreements executed by or on behalf of either Borrower and delivered
concurrently herewith or at any time hereafter to or for Lender in connection
with the Loan or any other transaction contemplated by this Agreement, all as
amended, restated, supplemented or modified from time to time.

     

    “Lock Up
Agreement” means that certain Lock-Up Agreement, dated as of the date
hereof, by and among Parent, Lender and Lalit Dhadphale.

     

    “Material Adverse
Effect” means, with respect to each Borrower, a material adverse effect
upon (a) the businesses, operations, properties, assets or condition (financial
or otherwise) of Borrower, (b) the ability of Borrower to perform its
obligations under any Loan Document to which it is a party, (c) the value of the
Collateral, or (d) the ability of Lender to enforce or collect any of the
Obligations.

     

    “Maturity
Date” has the meaning assigned to such term in Section
2.2.

     

    “Note”
means each of the 12% senior secured notes of Borrowers, in the form attached
hereto as Exhibit
A, evidencing each Advance made by the Lender to Borrowers pursuant to
Section 2.1 and
Section 2.2
hereof and any amendment and restatement thereof.

     

    “Obligations”
means all obligations (including the full and faithful discharge of each and
every term, condition, agreement, representation and warranty now or hereafter
made by Borrowers under the Loan Documents), liabilities and indebtedness of
every nature of Borrowers’ from time to time owed to Lender under the Loan
Documents including the principal amount of the Loan and accrued and unpaid
interest, now and/or from time to time hereafter owing, due or
payable.

     

    “Permitted
Encumbrances” means the following types of Liens:

     

    (A)           Liens
securing the Obligations;

     

    (B)           Liens
for taxes, assessments or other governmental charges the payment of which is not
yet due and payable or is being contested in good faith and by appropriate
proceedings promptly initiated and diligently conducted, and a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, provided, that such
liens shall have no effect on the priority of the Liens in favor of Lender or
the value of the assets in which Lender has such Liens and a stay of enforcement
of any such Liens shall be in effect;

     

    
      
        
        

      

      
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    (C)           Liens
imposed by law, such as carrier’s, warehousemen’s, mechanic’s, materialmen’s and
other similar Liens arising in the ordinary course of business and securing
obligations (other than Indebtedness for borrowed money) that are not overdue by
more than thirty (30) days or are being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, and a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefore, and, in the case of judgment Liens that have
been stayed or bonded, a reserve or other appropriate provision, if any, as
required by GAAP shall have been made therefor;

     

    (D)           Liens
arising under Capitalized Leases or securing purchase money Indebtedness in
favor of a seller of Equipment, if and only if the Lien is confined to the
property and improvements and the proceeds of the Equipment so
purchased;

     

    (E)           deposits
and pledges of cash securing (i) obligations incurred in respect of workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits, (ii) the performance of bids, tenders, leases (if the leases permit
granting Lender a security interest), contracts (other than for the payment of
money) and statutory obligations or (iii) obligations on surety or appeal bonds,
but only to the extent such deposits or pledges are incurred or otherwise arise
in the ordinary course of business and secure obligations not past
due;

     

    (F)           easements,
zoning restrictions and similar encumbrances on real property and minor
irregularities in the title thereto that do not (i) secure obligations for the
payment of money or (ii) materially adversely impair the value of such property
or its use by Borrower in the normal conduct of its business; and

     

    (G)           other
Liens permitted to be incurred by Borrowers pursuant to the terms of this
Agreement or any other Loan Document.

     

    “Permitted
Indebtedness” means (i) Borrowers’ indebtedness to Lender under this
Agreement or any of the other Loan Documents; (ii) Borrowers’ outstanding
Indebtedness as of the date of this Agreement as listed on Schedule
I; (iii) indebtedness to trade creditors incurred in the ordinary course
of business on ordinary trade terms and accrued expenses incurred in the
ordinary course of business; (iv) indebtedness (including Capitalized Leases)
incurred for the purpose of financing all or any part of the acquisition costs
of Equipment; and (v) any extension, renewal or refinancing of the indebtedness
described in clause (iv) above, provided that the principal amount and interest
rate on such indebtedness may not be increased.

     

    “Person”
means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

     

    “Registrable
Shares” has the meaning assigned to such term in Section
2.9(A).

     

    
      
        
        

      

      
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    “Restricted
Payment” means:  (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of the Capital Stock of any
Borrower now or hereafter outstanding, except a dividend payable solely with
shares of the class of stock on which such dividend is declared or distribution
made, (b)  any redemption or repurchase of Capital Stock or
Indebtedness of any Borrower now or hereafter outstanding, or the issuance of a
notice of an intention to do any of the foregoing; provided, however,
that repayment of Indebtedness in the ordinary course of business consistent
with past practice shall not be considered a Restricted Payment hereunder; (c)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of the Capital
Stock of any Borrower now or hereafter outstanding.

     

    “Securities
Act” means the Securities Act of 1933, as amended.

     

    “Subsidiary”
means, if applicable, with respect to any Person, any corporation, association
or other business entity of which more than fifty percent (50%) of the total
voting power of shares of stock, membership interests (or equivalent ownership
or controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person (or
any of its other Subsidiaries).

     

    “Taxes”
means all federal, state, municipal and other governmental taxes, levies,
charges, claims and assessments, and all interest, penalties and similar
liabilities relating thereto, which are or may be due by Borrowers with respect
to its business, operations, Collateral or otherwise.

     

    “UCC” means
the Uniform Commercial Code as in effect on the date hereof in the State of New
York, as amended from time to time, and any successor statute.

     

    “Warrants”
means the Common Stock purchase warrants of the Parent to be issued to the
Lender in connection with the making of Advances, pursuant to Section 2.8 of this
Agreement.  A form Warrant is attached hereto as Exhibit
B.

     

    1.2           Accounting
Terms.  For purposes of this Agreement, all accounting terms
not otherwise defined herein shall have the meanings assigned to such terms in
conformity with GAAP.

     

    1.3           Other Definitional
Provisions.  Any of the terms defined in Section 1.1 may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.  In this Agreement, words importing any
gender include the other genders; the words “including,” “includes” and
“include” shall be deemed to be followed by the words “without limitation”;
except as otherwise indicated (e.g., by references to agreements “as in effect
as of the date hereof” or words to that effect), references to agreements and
other contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.

     

    
      
        
        

      

      
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    SECTION
2

     

    LOAN AND
COLLATERAL

     

    2.1           Loan.  Subject
to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrowers set forth herein and in the other
Loan Documents, Lender agrees to make Loans to Borrowers in the aggregate
principal amount of up to One Million Dollars ($1,000,000) plus Legal Fees (as
defined below), subject to and on the terms and conditions set forth
herein.  The Loan shall be funded up to two (2) installments pursuant
to the terms and conditions of this Agreement (each an “Advance”)
as follows:

     

    (A)           Closing Date
Advances.  On the Closing Date, and subject to the conditions
set forth in Section
3.1(A) through 3.1(D) hereof, Lender shall advance to Borrowers (an
“Advance”)
an amount equal to Five Hundred Thousand Dollars ($500,000) plus legal fees (the
“Legal
Fees”) not to exceed $15,000 and reasonably agreed by the parties hereto
in advance of the Closing Date (the “First
Advance”).

     

    (B)           Additional
Advances.  Subject to the conditions set forth in Section 3.3 or Section 3.4, Lender
may make up to one (1) additional Advance (the “Additional
Advance”) to Borrowers.  The amount of the Additional Advance
shall be Five Hundred Thousand Dollars ($500,000) for an aggregate principal
amount outstanding of One Million Dollars ($1,000,000) plus Legal Fees following
the Additional Advance.

     

    2.2           Notes.  Each
Advance made by Lender to Borrowers pursuant hereto will be evidenced by a Note
to be executed by Borrowers before or concurrently with Lender’s disbursement of
such Advance.   On or prior to the (i) Closing Date, Borrowers
shall execute and deliver to Lender the Note evidencing the First Advance, and
(ii) the date upon which the Additional Advance is made, if any, Borrowers shall
execute and deliver to Lender an additional Note evidencing such Additional
Advance.

     

    2.3           Payments.  The
principal amount of and all accrued and unpaid interest on each Advance
hereunder shall be due and payable in full on the date that is twelve (12)
months after the date of the Note evidencing such Advance (the “Maturity
Date”).

     

    2.4           Notice of Accrued
Interest.  Following each calendar month, Borrowers shall
prepare a Statement of Interest indicating the amount of interest accrued under
each outstanding Note during such calendar month, and the aggregate amount of
interest accrued under each outstanding Note since the date of issuance thereof
(the “Interest
Statement”).  Borrowers shall deliver the Interest Statement to
Lender within seven days following the end of the prior calendar
month.

     

    2.5           Use of
Proceeds.  The proceeds of the Loan shall be used by Borrowers
for working capital purposes.

     

    2.6           Interest.

     

     (A)           Rate of
Interest.  Interest shall accrue on each Advance outstanding
from time to time at a rate equal to twelve percent (12%) per annum
..

     

    
      
        
        

      

      
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    (B)           Computation and Payment of
Interest.  Interest on each Advance shall not be compounded and
shall be computed on the basis of a 360-day year for the actual number of days
elapsed in the period during which it accrues.  With respect to each
Advance, interest shall commence on the date of each Note evidencing the
Advance.  In computing interest, the date of funding of each Advance
shall be included and the date of payment of each Advance shall be
excluded.  Interest shall be payable as set forth in Section 2.3
above.

     

    2.7          Payments and
Prepayments.

     

    (A)           Manner and Time of
Payment.  All payments made by Borrowers with respect to the
Obligations shall be made by wire transfer in United States Dollars to Lender’s
account, without deduction, defense, setoff or counterclaim.  Lender
shall wire all Advances to Borrowers as provided in Schedule
II, annexed hereto, unless Borrowers send Lender a Notice of Change of
Wire Instructions.

     

    (B)           Payments on Business
Days.  Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, the payment may be made on
the next succeeding Business Day and such extension of time shall be included in
the computation of the amount of interest or fees due hereunder.

     

    (C)           Voluntary
Prepayment.  Borrowers, so long as an Event of Default defined
in Section 7.1
has not occurred and is not continuing, shall have the right to prepay, at any
time and from time to time after the date hereof, without penalty or premium all
or any portion of the outstanding balance of the Loan, provided that (i) each such
prepayment shall be accompanied by payment of interest to date of payment on the
amount prepaid and (ii) Borrowers provide written notice to Lender of their
election to exercise to prepay all or any portion of the Loan at least fifteen
(15) days prior to such prepayment.

     

    (D)           Mandatory
Repayment.  In the event of the occurrence of (i) an Event of
Default, or (ii) a Change of Control of either Borrower, then the outstanding
balance of the Loan plus accrued and unpaid interest and all other amounts then
due and owing hereunder or under any other of the Loan Documents, shall be due
and payable.

     

    2.8          Warrants.

     

    (A)           Warrants.  Subject
to the limitations and restrictions set forth in Section 2.8(B)
hereof, as partial consideration for Lender making Advances to Borrowers, the
Parent shall issue to Lender at each closing of an Advance, pursuant to the
terms of this Agreement, Warrants to purchase up to an aggregate of twelve
million five hundred thousand (12,500,000) shares of Common Stock of Parent at a
purchase price of $0.08 per share as set forth in Section 2.8(B) of
this Agreement.

     

    (B)           Number of Warrants To Be
Issued With Each Advance.  The actual number of Warrants to be
issued at each closing shall equal 6,250,000.

     

    2.9          Registration
Rights.

     

    (A)           As
used herein, “Registrable
Shares” shall mean shares of Common Stock of Parent issued or issuable
upon the exercise of Warrants issued to and held by the Lender pursuant hereto,
provided, however, that any
such shares of Common Stock deemed Registrable Shares in accordance herewith
shall cease to be Registrable Shares (i) upon the sale of such shares pursuant
to a registration statement, (ii) upon the sale of such securities pursuant to
Rule 144 promulgated under the Securities Act, or (iii) on the date on which all
Registrable Shares held by Lender may be sold under Rule 144 of the Securities
Act without any limitations

     

    
      
        
        

      

      
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    (B)           Demand
Registration.  If, at any time following the date immediately
after Borrowers have delivered to Lender a Note evidencing an Advance, Parent
shall receive a written request from Lender to register for resale all or part
of the Registrable Shares, Parent shall, as promptly as practicable after such
request, prepare and file with the Commission a registration statement
sufficient to permit the resale of the Registrable Shares and will use its best
efforts through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable; provided, however, that Parent
shall only be obligated to prepare, file and use its best efforts to cause to
become effective, one such registration statement in any six (6) month
period.  Parent may, in its sole discretion, allow additional shares
of Common Stock to be included in such registration statement.

     

    (C)           Piggyback
Registration.  If Parent proposes to register any of its shares
of Common Stock under the Securities Act (other than a registration on Form S-8,
Form S-4 and/or any similar and/or successor forms) Parent shall promptly give
Lender at least 10 calendar days prior written notice of such registration and
include upon written request of the Lender the Registrable Shares in such
registration statement provided such Registrable Shares are not then currently
registered for resale.  Such registration rights under this Section 2.9(C) shall
terminate on the earlier to occur of (i) the date on which all Registrable
Shares held by Lender may be sold under Rule 144 of the Securities Act without
any limitations, and (ii) when all such Registrable Shares have been
sold.

     

    (D)           Selling Shareholder
Questionnaire.  As a condition precedent to Parent including
the Registrable Shares in a resale registration statement, the Lender shall have
completed, executed and dated a Selling Shareholder Questionnaire in a form
provided by Parent.

     

    2.10         Grant of Security
Interest.  To secure the payment and performance of the
Obligations, including all renewals, extensions, restructurings and refinancings
of any or all of the Obligations, each Borrower hereby assigns and grants to
Lender, a continuing first priority Lien, subject only to Permitted
Encumbrances, in and to all right, title and interest of such Borrower in all
assets and properties of such Borrower, whether now owned or existing or
hereafter acquired or arising and regardless of where located, including the
proceeds thereof (all being collectively referred to as the “Collateral”),
and including, without limitation, the following property of each
Borrower:

     

    (i)          Accounts;

    (ii)         Deposit
Accounts (as defined in the UCC);

    (iii)        Documents
of Title;

    (iv)        Equipment;

    (v)         General
Intangibles;

    (vi)        Inventory;

    (vii)       Investment
Property; and

    (viii)      Intellectual
Property.


     

    
      
        
        

      

      
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    Eac
Borrower represents, warrants and covenants that the security interest granted
herein is and shall at all times continue to be a first-priority security
interest in the Collateral (subject only to Permitted Liens that may have
superior priority to Lender’s Lien under this Agreement).  If any
Borrower shall acquire a commercial tort claim, such Borrower shall notify
Lender in a writing signed by such Borrower of the general details thereof and
grant to Lender in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement.

     

    2.11           Preservation of Collateral
and Perfection of Security Interests Therein.  Each Borrower
shall, at Lender’s reasonable request, at any time and from time to time,
execute and deliver to Lender within ten (10) days of such request, such
financing statements, documents and other agreements and instruments and do such
other acts and things as Lender may deem reasonably necessary in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender (free and clear of all other Liens, claims and
rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Encumbrances) to secure payment of the Obligations,
and in order to facilitate the collection of the Collateral.

     

    2.12           Possession of Collateral and
Related Matters.  Until an Event of Default has occurred and is
continuing, each Borrower shall have the right, except as otherwise provided in
this Agreement, in the ordinary course of such Borrower’s business, to (a) sell
or lease any  Inventory normally held by such Borrower for any such
purpose, (b) use and consume any raw materials, work-in-process or other
materials normally held by such Borrower for such purpose, or (c) dispose of any
obsolete or excess equipment in the ordinary course of business; provided, however, that a sale
in the ordinary course of business shall not include any transfer or sale in
satisfaction, partial or complete, of any debt owed by such
Borrower.

     

    2.13           Release of Security
Interests.  If this Agreement is terminated, Lender’s Lien
shall continue until the Obligations are repaid in full in cash.  Upon
the indefeasible payment and satisfaction in full of the Obligations, Lender
shall release all liens and security interests granted by Borrowers by execution
and/or delivery of appropriate documentation, including, but not limited to, UCC
termination statements, (A) within three (3) Business Days of such payment or
(B) concurrently with such payment if Borrowers give three (3) Business Days
advance notice of such payment.

     

    SECTION
3

     

    CONDITIONS
TO  LOAN

     

    3.1           Conditions.  The
obligations of Lender to make the First Advance on the Closing Date and any
subsequent Advance are subject to satisfaction or waiver of each of the
conditions set forth below:

     

    (A)           Closing
Deliveries.  Lender shall have received this Agreement,
executed by Borrowers and the Notes and Warrants for the First Advance, all
executed by Parent and/or Subsidiary, as applicable.

     

    (B)           Security
Interests.  Lender shall have received reasonably satisfactory
evidence that all security interests and Liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute valid first-priority Liens on the Collateral, with priority over all
other Liens subject only to Permitted Encumbrances.

     

    
      
        
        

      

      
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    (C)           Representations and
Warranties.  The representations and warranties contained
herein shall be true, correct and complete in all material respects on and as of
the Closing Date to the same extent as though made on and as of that date,
except for any representation or warranty limited by its terms to a specific
date.

     

    (D)           No Event of
Default.  No Event of Default has occurred or is
continuing.

     

    3.2          Notification of Financial
Status.  Within thirty days of attaining Cash Flow positive
status for any calendar month, Borrowers shall deliver to Lender written notice
thereof (the “Cash Flow
Positive Notice”).  As used herein, “Cash Flow”
means, for any period, earnings from operations (“Earnings”),
plus (without duplication): (i) any interest expense deducted in determining
Earnings, plus (ii) any income, franchise and commercial activity taxes deducted
in determining Earnings, plus (iii) amortization and depreciation and other
non-cash changes deducted in determining Earnings, plus (iv) attorneys' and
other professional fees and expenses incurred by Borrower with respect to the
transactions contemplated hereby, plus (v) any non-recurring expenses deducted
in determining Earnings, minus (vi) the sum of interest income, extraordinary
gains and gains from sales of assets (other than sales of inventory in the
ordinary course of business), all as determined on a consolidated basis in
accordance with the GAAP.

     

    3.3          Request for Additional
Advance by Borrowers.  Subject to Section 3.6, at any
time following delivery of a Cash Flow Positive Notice, for so long as Borrowers
remain Cash Flow positive, Borrowers may deliver to Lender a written notice of
request of issuance of an Additional Advance.  Lender shall be
obligated to make such Additional Advance upon satisfaction of the following
conditions:

     

    (A)           Delivery of
Documents.  Lender shall have received a Note executed by
Borrowers evidencing the Advance and a Warrant as calculated in Section
2.8(B).

     

    (B)           Representations and
Warranties.  The representations and warranties of the
Borrowers contained herein shall be true, correct and complete in all material
respects on and as of the date of the funding of the Additional Advance to the
same extent as though made on and as of that date, except for any representation
or warranty limited by its terms to a specific date.

     

    (C)           No
Default.  No event shall have occurred or is continuing or
would result from the consummation of the requested borrowing that would
constitute an Event of Default or a Default.

     

    3.4          Request for Additional
Advance by Lender.  Subject to Section 3.6, at any
time following receipt of a Cash Flow Positive Notice, Lender may notify
Borrowers that it will make an Additional Advance pursuant to the terms
hereof.  Borrower shall be obligated to accept such Additional Advance
upon satisfaction of the following conditions.

     

     (A)           Delivery of
Documents.  Borrower shall have received an Additional Advance
via wire transfer pursuant to the wire transfer instructions attached hereto as
Schedule
II.

     

     (B)           Representations and
Warranties.  The representations and warranties of the Lender
contained herein shall be true, correct and complete in all material respects on
and as of the date of the funding of the Additional Advance to the same extent
as though made on and as of that date, except for any representation or warranty
limited by its terms to a specific date.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    3.5          Additional Convenants of
Borrowers.  In the event Borrowers receive an Additional
Advance pursuant to Section 3.4 hereof,
Borrowers shall execute and deliver to Lender, within five days of receipt of
the Additional Advance:

     

    (A)           
A Note executed by Borrowers evidencing the Advance in substantially the form
attached hereto as Exhibit A;
and

     

    (B)           
A Warrant executed by Borrowers in substantially the form attached hereto as
Exhibit B, with
the warrant  amount calculated as set forth in Section
2.8(B).

     

    3.6          Limitation on Additional
Advance Period.  Borrower’s written request for the Additional
Advance under Section
3.3, or Lender’s written notice that it will make the Additional Advance
under Section
3.4, must be given on or before the later of (i) 12 months after the date
that Borrowers have delivered the Cash Flow Positive Notice, or (ii) the
Maturity Date of the First Advance (the “Additional
Advance Period”).  Borrower’s right and obligation to receive
the Additional Advance, and Lender’s right and obligation to make the Additional
Advance, shall terminate upon expiration of the Additional Advance
Period.


     

    SECTION
4

     

    BORROWERS’ REPRESENTATIONS
AND WARRANTIES

     

    To induce
Lender to enter into this Agreement, and to fund the Advances, each Borrower
represents and warrants to Lender that the following statements are true,
correct and complete in all material respects with respect to Borrower making
such representation or warranty as of the date hereof and as of the date on
which any Additional Advance is made.  Such representations and
warranties, and all other representations and warranties made by such Borrower
herein or in the other Loan Documents, shall survive the execution and delivery
of this Agreement and the closing contemplated hereby:

     

    4.1           Authority.  Borrower
is a corporation duly organized, validly existing and in good standing, under
the laws of the State of Delaware.  Borrower has the power and
authority to own its properties and assets and to transact the business in which
is it engaged and presently proposes to engage, and has obtained all necessary
and material governmental authorizations, consents and licenses in connection
therewith.  Borrower has all requisite legal and corporate power and
authority and has obtained all approvals and consents necessary to enter into
the Loan Documents and to carry out and perform its obligations under the terms
hereof and thereof.  Borrower’s execution, delivery and performance of
this Agreement and the additional Loan Documents will not violate, or conflict
with or constitute a default under, the terms of Borrower’s charter or Bylaws or
any statute, regulation, ordinance, rule of law, agreement, contract, mortgage,
indenture, bond, bill, note, judgment, order or decree of any court or
arbitrator to which Borrower is a party or other instrument or writing binding
upon Borrower or to which Borrower is subject.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

     

    4.2           Due Authorization; Binding
Obligation.  All corporate action on the part of Borrower, its
officers and directors necessary for Borrower’s authorization, execution and
delivery of, and the performance of all Borrower’s obligations under, this
Agreement and other Loan Documents has been taken.  Borrower has duly
executed and delivered this Agreement.  This Agreement constitutes a
valid and legally binding obligation of Borrower, enforceable in accordance with
its terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other similar laws of general application relating
to or affecting the enforcement of creditors’ rights generally and (ii) the
effect of rules of law governing the availability of equitable
remedies.  The Notes (and, with respect to Parent, the Warrants) when
executed and delivered in accordance with the terms of this Agreement, will
constitute valid and legally binding obligations of Borrower and/or Parent as
applicable, enforceable in accordance with their terms, except as enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
similar laws of general application relating to or affecting the enforcement of
creditors’ rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies.

     

    4.3           Governmental
Consents.  No consent, approval, order, or authorization of or
registration, qualification, designation, declaration or filing with, any
Governmental Authority is required on the part of Borrower to enable Borrower to
execute, deliver and perform its obligations under this Agreement or the
Notes.

     

    4.4           Reports and Financial
Statements.  Except as set forth in Schedule 4.4, the Parent
has timely filed all reports required to be filed with the SEC pursuant to the
Exchange Act or the Securities Act of 1933 (the “Securities
Act”) since the Merger Date (as defined below) (collectively, the “SEC
Reports”), and has previously made available to the Lender true and
complete copies of all such SEC Reports.  As used herein, “Merger
Date” means May 14, 2009.  Such SEC Reports, as of their
respective dates (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing), complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and none of such SEC Reports (together with all other
written information heretofor provided by Parent to the Lender in connection
with this Agreement), as of their respective dates (or if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  The consolidated financial statements of Parent included
in the SEC Reports have been prepared in accordance with GAAP consistently
applied throughout the periods indicated (except as otherwise noted therein or,
in the case of unaudited statements, as permitted by Form 10-QSB of the SEC) and
fairly present (subject, in the case of unaudited statements, to normal,
recurring year-end adjustments and any other adjustments described therein), in
all material respects, the consolidated financial position of Parent as of the
dates thereof and the consolidated results of operations and cash flows of
Parent for the periods then ended.  Except as disclosed in the SEC
Reports there has been no change in any of the significant accounting policies
or procedures of Parent since the Merger Date.

     

    4.5           Absence of Certain Changes
or Events.  Except as set forth in the SEC Reports filed prior
to the date of this Agreement, since September 30, 2009, there has not been any
fact, event, circumstance or change affecting or relating to either Borrower
which has had or could reasonably be expected to have a Material Adverse
Effect.  The transactions contemplated by this Agreement will not
require the consent from or the giving of notice to a third party pursuant to
the terms, conditions or provisions of any Material Contract.

     

    
      
        
        

      

      
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    4.6           Litigation.  Except
for litigation disclosed in the notes to the audited financial statements of
Parent as of and for the period ended September 30, 2009, or in SEC Reports
filed subsequent thereto but prior to the date of this Agreement, as of the date
hereof, there is no suit, action, proceeding or investigation pending or, to the
knowledge of Borrower, threatened against either Borrower or with respect to
which either Borrower could be required to provide indemnification or to
otherwise contribute to liabilities or damages relating thereto, the outcome of
which has had or could reasonably be expected to have a Material Adverse Effect;
nor is there any judgment, decree, injunction, rule or order of any Governmental
Authority outstanding against either Borrower having, or which has had or could
reasonably be expected to have, a Material Adverse Effect.

     

    4.7           Compliance with
Law.  Except as set forth in the SEC Reports filed prior to the
date of this Agreement, Borrower has not violated any applicable laws, statutes,
regulations or orders of any Governmental Authority and Borrower is in
compliance with all applicable laws, statutes, regulations and order of all
Governmental Authorities, other than where such violation or noncompliance,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.  Except as set forth in
the SEC Reports filed prior to the date of this Agreement, Borrower has not
received any notice to the effect that, or otherwise been advised that or is
aware that, Borrower is not in such compliance with any applicable laws, statues
regulations or orders of any Governmental Authority, and Borrower has no
knowledge that any existing circumstances are reasonably likely to result in
such violations of any applicable laws, statues regulations or orders of any
Governmental Authority.

     

    4.8           Absence of Undisclosed
Liabilities; Ability to Pay Debts.

     

     (a)           Except
for liabilities or obligations which are accrued or reserved against in Parent’s
consolidated financial statements (or reflected in the notes thereto) as of and
for the period ended September 30, 2009 as included in the SEC Reports or which
were incurred after September 30, 2009 in the ordinary course of business and
consistent with past practice and otherwise permitted by this Agreement,
Borrower does not have any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of a nature required by GAAP to be reflected
in a balance sheet (or reflected in the notes thereto) or which have had or
could reasonably be expected to have a Material Adverse Effect.

     

     (b)           As
of the date of this Agreement, Borrower has not incurred and does not intend to
incur, and does not believe that it will incur, debts beyond its ability to pay
such debts as such debts mature and Borrower believes that it has sufficient
capital with which to conduct its businesses.  For purposes of this
Section 4.8(b),
“debt”
means any liability on a claim, and “claim”
means (i) right to payment, whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    4.9           
No
Default.  Borrower is not in breach
or violation of, or in default under (and no event has occurred which with
notice or lapse of time or both would constitute such a breach, violation or
default), any term, condition or provision of (a) its Certificate of
Incorporation, as amended, or Bylaws, or (b) (x) except as set forth in the SEC
Reports filed prior to the date of this Agreement, any order, writ, decree,
statute, rule or regulation of any Governmental Authority applicable to Borrower
or any of its properties or assets or (y) any agreement required to be filed as
a “Material Contract” as an exhibit to the Parent’s Annual Report on Form 10-KSB
for the year ended December 31, 2008 or any periodic Exchange Act report
required to be filed since then (each a, “Material
Contract”), except in the
case of this clause (b), which breaches, violations or defaults, individually or
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect.

     

    4.10           Title to
Properties.  Borrower has good,
sufficient and legal title, to all of its properties and assets, including the
Collateral.  Except for Permitted Encumbrances, all such properties
and assets are free and clear of Liens.  To the knowledge of Borrower,
there are no actual, threatened or alleged defaults with respect to any leases
of real property under which Borrower is lessee or lessor which could reasonably
be expected to have a Material Adverse Effect.  Borrower is not a
party to, nor is bound by, any material license or other agreement with respect
to which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Lender’s right to sell any
Collateral.  Borrower shall provide written notice to Lender within
ten (10) days of entering or becoming bound by any such license or agreement
(other than over-the-counter software that is commercially available to the
public).  Borrower shall take such steps as Lender requests to obtain
the consent of, or waiver by, any person whose consent or waiver is necessary
for (x) all such licenses or agreements to be deemed “Collateral” and for Lender
to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future, and (y) Lender to have the ability in
the event of a liquidation of any Collateral to dispose of such Collateral in
accordance with Lender’s rights and remedies under this Agreement and the other
Loan Documents.

     

    4.11           Intellectual
Property.  Borrower owns, is licensed
to use, or otherwise has the lawful right to use, all Intellectual Property, if
any, used in or necessary for the conduct of its businesses as currently
conducted, without conflict with any rights of others.

     

    4.12           Brokers.  Except as set forth in
Schedule 4.12, Borrower does not have any contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement nor has or will have any liability for any
brokerage or finders’ fees or agents, commission or any similar charges in
connection with this Agreement.

     

    4.13           Investment
Company.  Borrower is not an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.

     

    4.14           Subsidiaries.  The Subsidiary is a
wholly-owned subsidiary of the Parent.  Neither the Parent nor the
Subsidiary has any other subsidiaries.
 

    
      
         


      

      
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    4.15           Tax Returns
and Payments.  Borrower has timely filed
or caused to be timely filed with the appropriate taxing authority all Federal
and other material returns, statements, forms and reports for taxes (the
“Returns”) required to be filed by, or with
respect to the income, properties or operations of, Borrower.  The
Returns accurately reflect in all material respects all liability for taxes of
Borrower for the periods covered thereby.  Borrower has paid all
material taxes and assessments payable by it which have become due, other than
those that are being contested in good faith and adequately disclosed and fully
provided for on the financial statements of Borrower in accordance with
GAAP.  There is no material action, suit, proceeding, investigation,
audit or claim now pending or, to the knowledge of Borrower, threatened by any
authority regarding any taxes relating to Borrower.

     

    4.16           Full
Disclosure.  No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Lender, as of the date such
representation, warranty, or other statement was made, taken together with all
such written certificates and written statements given to Lender, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading.

     

    SECTION
5

     

    LENDER’S
REPRESENTATIONS AND WARRANTIES

     

    To induce Borrowers to enter into this
Agreement, the Lender represents and warrants to Borrowers that the following
statements are true, correct and complete in all material respects on and as of
the Closing Date.

     

    5.1        
   Authorization
of Borrowing; No Conflict.  The Lender has the power
and authority to enter into this Agreement and the other Loan
Documents.  The execution, delivery and performance of the Loan
Documents by the Lender will have been duly authorized by all necessary limited
liability company action.  The execution, delivery and performance of
the Loan Documents by the Lender and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents by the Lender, do
not contravene and will not be in contravention of any applicable law,
organizational documents of Lender or any agreement or order by which it or any
of its property is bound.  This Agreement and the other Loan
Documents, including the Note(s), when executed and delivered, are and will be,
the legally valid and binding obligations of the Lender, enforceable against the
Lender in accordance with their respective terms except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, moratorium or other
similar laws effecting the enforcement of creditors rights generally and subject
to any equitable principles limiting the right to obtain specific performance of
any such obligation.

     

    5.2      
     Investment
Purposes; Accredited Investor. The Lender (a) is acquiring the Notes,
the Warrants and the Registrable Shares (collectively, the “Securities”) for investment purposes only, for its
own account, and not as nominee or agent for any other Person, and not with a
view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) understands and acknowledges that the
Securities have not been registered under the Securities Act or any other
securities laws, (c) is not an “affiliate” (as defined in Rule 144 under the
Securities Act) of the Company, (d) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, (e) is an “accredited investor” within the meaning of
Rule 501 of Regulation D under the Securities Act, (f) has had the opportunity
to ask questions and to receive answers from Borrowers, and to obtain
information necessary to evaluate the merits and risks of this investment, and
(g) understands, acknowledges and agrees that Securities have not been, and the
Notes and the Warrants will not be, registered under (and that Parent has no
present intention to register the Notes nor the Warrants under) the Act or
applicable state securities laws, and may not be sold or otherwise transferred
by the Lender to a United States person unless they have been registered under
the Act and applicable U.S. state securities laws or are sold or transferred in
a transaction exempt therefrom.


    
      
         


      

      
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    SECTION
6

     

    COVENANTS

     

    Each Borrower covenants and agrees that
until payment and performance in full of all Obligations hereunder unless
Borrower has received the prior written consent of Lender, Borrower shall
perform all covenants in this SECTION
6.

     

    6.1      
      Indebtedness
and Liabilities.  Borrower shall not directly
or indirectly create, incur, assume, guaranty, or otherwise become or remain
directly or indirectly liable, on a fixed or contingent basis, with respect to
any Indebtedness senior to or pari passu with the Obligations except: (a) the
Obligations; (b) Capital Leases and purchase money financing for Equipment
entered into in the ordinary course of business (if the leases permit granting
Lender a security interest); (c) trade payables and normal accruals in the
ordinary course of business not yet due and payable or with respect to which
Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that Borrower has
established adequate reserves therefor, if appropriate under GAAP, and (d)
Permitted Indebtedness.

     

    6.2      
      Transfers,
Liens and Related Matters.

     

     
(A)          Transfers.  Borrower shall not sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to any of the Collateral or other assets, except that
Borrower may (i) sell Inventory and dispose of obsolete or excess Equipment in
the ordinary course of business; and (ii) make other Asset Dispositions in the
ordinary course of business.

     

      (B)           Liens.  Except for Permitted
Encumbrances, Borrower shall not directly or indirectly create, incur or assume
(or agree to create, incur or assume) or permit to exist any Lien on or with
respect to any of the Collateral or other assets or any proceeds, income or
profits therefrom.

     

     
(C)          No Pledge
Restrictions.  Borrower shall not enter
into or assume any agreement (other than the Loan Documents and any document
evidencing or governing Permitted Indebtedness) restricting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.

     

    6.3           
Restricted
Payments.  Borrower shall not directly
or indirectly declare, order, pay, make or set apart any sum for any Restricted
Payment, except as expressly permitted in this Agreement or any other Loan
Document.


    
      
         


      

      
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    6.4        
   Restriction
on Fundamental Changes.  Borrower shall
not:  (a) undergo a Change of Control; or (b) except with thirty (30)
days prior written notice to Lender, change its jurisdiction of incorporation,
type of organization (as defined in the UCC) tax, charter or other
organizational number, or its legal name; or (c) acquire by purchase or
otherwise all or substantially all of the assets of, or stock or other evidence
of beneficial ownership, of any Person or any business division of any Person
without Lender’s prior written consent; or (d) merge into or consolidate with
any other Person, except that any Subsidiary of Borrower may merge into or
consolidate with Borrower or any other wholly-owned Subsidiary of Borrower; or
(e) liquidate, wind up their affairs or undergo any dissolution; or (f) acquire
the capital stock of any other Person for investment
purposes.  Furthermore, Borrower shall not take any action that could
result in the sale of all or substantially all of Borrower’s assets, or the
sale, lease or other disposition of any of Borrower’s assets (including the
grant of any exclusive distribution rights or other exclusive rights to
Borrower’s Intellectual Property) outside the ordinary course of
business.

     

    6.5         
   Conduct of
Business.  Borrower shall not engage
in any business other than businesses of the type engaged in by Borrower on the
Closing Date and any businesses reasonably related thereto without the prior
consent of Lender which consent shall not be unreasonably withheld, conditioned
or delayed.

     

    6.6        
    Charter
Documents.  Borrower shall not (by
merger, consolidation or otherwise) amend or otherwise modify its certificate of
incorporation or bylaws.

     

    6.7        
   Redemption.  Borrower shall not redeem,
repurchase or otherwise acquire for value (or pay into or set aside for a
sinking fund for such purpose) any shares of Common Stock or options to purchase
capital stock of Parent other than the repurchase of stock from employees,
stockholders or other service providers pursuant to agreements to repurchase
such stock at cost in connection with the termination of such employee,
stockholder or other service provider providing services to Borrower, and the
contribution of stock by a stockholder pursuant to an agreement to contribute
stock.

     

    6.8        
   Dividends.  Borrower shall not pay or
declare payment of any dividend or other distribution on any shares of Capital
Stock; provided however, that Subsidiary shall be permitted to pay dividends or
make other distributions to Parent to allow Parent to pay the Obligations and
other expenses incurred in the ordinary course of business.

     

    6.9        
   Proceeds.  The proceeds of the Loan
shall be used in accordance with Section
2.5.

     

    SECTION
7

     

    DEFAULT,
RIGHTS AND REMEDIES

     

    7.1         
   Event of
Default.  “Event
of Default” means the
occurrence or existence of any one or more of the following with respect to
either or both Borrowers:

     

     
(A)           Payment.  Failure to make payment of
any of the Obligations when due, and such failure shall not be remedied within
ten (10) Business Days of the applicable due date; or

     

     
(B)           Involuntary
Bankruptcy; Appointment of Receiver, etc.  (1) A court enters a decree
or order for relief with respect to Borrower or any of its properties in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (2) Subject to
Section
7.1(D), the continuance of
any of the following events for sixty (60) days unless dismissed or
discharged:  (a) an involuntary case is commenced against Borrower,
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or (b) a decree or order of a court for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Borrower or over all or a substantial part of its property,
is entered; or (c) an interim receiver, trustee or other custodian is appointed
without the consent of Borrower for all or a substantial part of the property of
any Borrower; or


    
      
         


      

      
        -19-

        
          

        

      

      
         


      

    


     
(C)           Voluntary
Bankruptcy; Appointment of Receiver,
etc.  (1) An
order for relief is entered with respect to Borrower or its properties or
Borrower commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case or to the conversion of an involuntary
case to a voluntary case under any such law or consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of their property; or (2) Borrower makes any assignment for the
benefit of creditors; or (3) the board of directors of Borrower adopts any
resolution or otherwise authorizes action to approve any of the foregoing
actions; or

     

     
(D)          Dissolution.  Any order, judgment or
decree is entered against Borrower decreeing the dissolution or split up of
Borrower and such order remains undischarged or unstayed for a period in excess
of sixty (60) days; or

     

     
(E)           Covenant
Default.

     

     
(a)           Borrower violates any covenant in
SECTION
6; or

     

     
(b)           Borrower fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Document, and as to any default (other
than those specified in this SECTION
7) under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure the default within ten (10) days after Borrower becomes aware of the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default.  Grace periods provided under
this section shall not apply, among other things, to any covenants set forth in
subsection (a) above; or

     

     
(F)           Judgments.  One or more final,
non-appealable judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least $25,000 (not covered by
independent third-party insurance as to which liability has been accepted by
such insurance carrier) shall be rendered against Borrower and shall remain
unsatisfied, unvacated, or unstayed for a period of ten (10) days after the
entry thereof; or

     

     
(G)           Misrepresentations.  Borrower or any of
Borrower’s officers or directors makes any representation, warranty, or other
statement now or later in this Agreement, any Loan Document or in any writing
delivered to Lender or to induce Lender to enter this Agreement or any Loan
Document, and such representation, warranty, or other statement is incorrect in
any material respect when made.


    
      
         


      

      
        -20-

        
          

        

      

      
         


      

    


    7.2         
   Acceleration.  Upon the occurrence of any
Event of Default, all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest or other requirements of any kind,
all of which are hereby expressly waived by Borrower.

     

    7.3        
    Remedies.  If any Event of Default
shall have occurred and be continuing, in addition to and not in limitation of
any rights or remedies available to Lender at law or in equity, Lender may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC (whether or not the UCC
applies to the affected Collateral).

     

    SECTION
8

     

    MISCELLANEOUS

     

    8.1         
  Assignment.  The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of Borrowers and
Lender; provided, however, that neither party hereto may assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the other party and any prohibited assignment shall be
void.

     

    8.2     
       Amendments
and Waivers.  No
amendment, modification, termination or waiver of any provision of this
Agreement or of the other Loan Documents, or consent to any departure by any
Borrower therefrom or any of the terms, conditions, or provisions thereof, shall
be effective unless the same shall be in writing and signed by Lender and
Borrowers.  Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given.

     

    8.3       
    Notices.  Unless otherwise
specifically provided herein, all notices shall be in writing addressed to the
respective party as set forth below and may be personally served, telecopied or
sent by overnight courier service or United States mail and shall be deemed to
have been given: (a) if delivered in person, when delivered; (b) if delivered by
telecopy, on the date of transmission if transmitted on a Business Day before
4:00 p.m.  Eastern standard time or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two (2) days after delivery
to such courier properly addressed; or (d) if by U.S.  Mail, four (4)
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.

     

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                If to
      Borrowers:

                              	
                                Healthwarehouse.com,
      Inc.

                                100 Commerce
      Blvd.

                                Cincinnati, OH
      45140

                                Attention:  Lalit
      Dhadphale

                                Facsimile:  1-866-821-3784

                              
	 
      	 
      
	
                                If to
    Lender:

                              	
                                HWH Lending
LLC

                                2200 Fletcher Ave., 5th
      Floor

                                Fort Lee, NJ
      07024

                              
	 
      	
                                Attention:  Gary
      Singer

                              
	 
      	
                                Facsimile:  (201)
      224-2762

                              


                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         


      

      
        -21-

        
          

        

      

      
         


      

    


    or to such other address as the party
addressed shall have previously designated by written notice to the serving
party, given in accordance with this Section
8.3.

     

    8.4          
Survival of
Warranties and Certain Agreements.

     

    (A)           All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof.  Such representations and
warranties have been or will be relied upon by Lender regardless of any
investigation made by Lender or on its behalf and notwithstanding that Lender
may have had notice or knowledge of any breach of a representation or warranty,
and shall continue in full force and effect as long as any Obligation shall
remain outstanding.

     

    (B)           This Agreement and the Loan Documents
shall remain in full force and effect until such time as the Obligations have
been indefeasibly paid and satisfied in full, at which time this Agreement shall
be terminated.  Notwithstanding the foregoing, this Agreement and the
Loan Documents shall continue to be effective or be automatically reinstated, as
the case may be, if at any time payment, in whole or in part, of any of the
Obligations is rescinded or must otherwise be restored or returned by Lender as
a preference, fraudulent conveyance or otherwise, all as though such payment had
not been made.

     

    8.5           Indulgence
Not Waiver.  No
failure or delay on the part of Lender in the exercise of any power, right or
privilege shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

     

    8.6           Entire
Agreements.  This
Agreement, the Notes, and the other Loan Documents referred to herein embody the
final, entire agreement among the parties hereto and supersede any and all prior
commitments, agreements, representations, and understandings, whether written or
oral, relating to the subject matter hereof and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.  There are no oral agreements among
the parties hereto.

     

    8.7           Severability.  The invalidity, illegality
or unenforceability in any jurisdiction of any provision in or obligation under
this Agreement or the other Loan Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions or obligations
under this Agreement, or the other Loan Documents or of such provision or
obligation in any other jurisdiction.

     

    8.8           Headings.  Section and subsection
headings in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose or be
given any substantive effect.

     

    8.9           APPLICABLE
LAW.  THIS
AGREEMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING
UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED SOLELY AND EXCLUSIVELY IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
 

    
      
         


      

      
        -22-

        
          

        

      

      
         


      

    


    8.10           CONSENT TO
JURISDICTION.  EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS
TO THE SOLE AND EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES, THE WARRANTS OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED SOLELY AND
EXCLUSIVELY IN SUCH COURTS.  EACH PARTY HERETO ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, THE NOTES, THE WARRANTS, THE OTHER LOAN
DOCUMENTS OR THE OBLIGATIONS.  IF ANY PARTY HERETO PRESENTLY IS, OR IN
THE FUTURE BECOMES, A NONRESIDENT OF THE STATE OF NEW YORK, EACH PARTY HERETO
HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, DIRECTED TO SUCH PERSON, AT SUCH PERSON’S ADDRESS AS
SET FORTH IN SECTION
8.3 HEREOF OR AS MOST
RECENTLY NOTIFIED BY SUCH PERSON IN WRITING PURSUANT TO SECTION
8.3 AND SERVICE SO MADE
SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED AS
AFORESAID.

     

    8.11           WAIVER OF
JURY TRIAL.  EACH
PARTY HERETO HEREBY WAIVES
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, THE TERM NOTES OR THE OTHER LOAN
DOCUMENTS.  EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE TERM NOTES AND THE
OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS.  EACH PARTY HERETO FURTHER WARRANTS AND
REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

     

    8.12           Construction.  Borrowers and Lender each
acknowledge that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by Borrower and
Lender.

     

    8.13           Counterparts;
Effectiveness.  This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one and the same
instrument.  This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto.  Delivery of an
executed counterpart of a signature page to this Agreement, any amendments,
waivers, consents or supplements, or to any other Loan Document by facsimile or
email shall be as effective as delivery of a manually executed counterpart
thereof.


    
      
         


      

      
        -23-

        
          

        

      

      
         


      

    


    8.14         Confidentiality.  For the purposes of this
Section
8.14, “Confidential
Information” means all
financial and other information delivered to Lender by or on behalf of Borrowers
in connection with the transactions contemplated by or otherwise pursuant to
this Agreement that is proprietary in nature or that is clearly marked or
labeled (or otherwise adequately identified) as being confidential information
of any Borrower, provided, that such term does not include
information that (a) was publicly known prior to the time of such disclosure,
(b) ubsequently becomes publicly known through no act or omission by Lender
or any Person acting on its behalf, (c) otherwise becomes publicly known other
than through disclosure by any Borrower, or (d) constitutes financial statements
delivered hereunder that are otherwise publicly available.  Lender
will maintain the confidentiality of such Confidential Information in accordance
with commercially reasonable procedures adopted by Lender in good faith to
protect confidential information of third parties delivered to it, provided, that Lender may deliver or disclose
Confidential Information to:

     

    (i)           its directors, officers, employees,
agents, attorneys and affiliates, to the extent such disclosure reasonably
relates to the administration of the Loan, and further provided that each such
recipient of Confidential Information agrees in writing provided to any
Borrower, to keep such information confidential;

     

    (ii)          its financial advisors and other
professional advisors who are advised to hold confidential the Confidential
Information; or

     

    (iii)         any other Person (including auditors and
other regulatory officials) to which such delivery or disclosure may be
necessary or appropriate (A) to comply with any applicable law, rule, regulation
or order, (B) in response to any subpoena, examination, or other legal process,
(C) in connection with any litigation to which Lender is a
party.

    


    8.15           Time of
Essence.  Time is
of the essence for the performance of all Obligations set forth in this
Agreement.


     

    [This space intentionally left blank –
signature page follows.]

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    Witness the due execution hereof by the
respective duly authorized officers of the undersigned as of the date first
written above.

     

    
      
        
          
            
              
                
                  	
                          LENDER:

                        	
                          HWH Lending
    LLC

                        
	 
      	 
      
	 
      	
                          By:

                        	
                          /s/ Gary
    Singer

                        
	 
      	
                          Name:

                        	
                          Gary
  Singer

                        
	 
      	
                          Title:

                        	
                          President

                        
	 
      	 
      
	
                          PARENT:

                        	
                          Healthwarehouse.com,
      Inc.

                        
	 
      	 
      
	 
      	
                          By:

                        	
                          /s/ Lalit
      Dhadphale

                        
	 
      	
                          Name:

                        	
                          Lalit
    Dhadphale

                        
	 
      	
                          Title:

                        	
                          President &
      CEO

                        
	 
      	 
      	 
      
	
                          SUBSIDIARY:

                        	
                          HWAREH.com,
      Inc.

                        
	 	 
	 	

                          By:

                        	

                          /s/ Lalit
      Dhadphale

                        
	 
      	
                          Name:

                        	
                          Lalit
    Dhadphale

                        
	 
      	
                          Title:

                        	
                          President &
      CEO

                        


                

              

            

          

        

      

    

    
    

     

    
      Signature
Page to Loan and Security Agreement